As the name implies, the ink used has magnetic qualities; the shapes of the digits are carefully tuned for error-free recognition.

Up through the mid 1940s, it was possible to process bank checks manually. However, by the mid 1940s the banking system was inundated with paper as society grew more mobile and affluent. Finding a means of handling the growing number of paper documents became vital to bankers.

The system now known as MICR was created during the 1950s by Stanford Research Institute, in response to increased demand by the banking industry for a streamlined method of processing checks. The typeface, or font, that they developed (called E-13B) was chosen for its superior recognizability by machines. Their specifications for producing the E-13B font were accepted as the standard by the American Bankers Association (ABA) in 1958. By the end of 1959, the first checks using magnetic ink were successfully produced; in 1963, the American National Standards Institute (ANSI) accepted the ABA specifications as the American standard for MICR printing.

(excerpted from Burton System Solution's website and amended and linked for Everything2)